As forbearance ends, CDR referrals in Q4 near 9-month value

With forbearance on the restructured assets expiring on April 1, referrals to the CDR cell in the March quarter of FY15 stood close to the value in the first nine months of the fiscal.

With forbearance on the restructured assets expiring on April 1, referrals to the CDR cell in the March quarter of FY15 stood close to the value in the first nine months of the fiscal.

The cell had received references worth R21,100 crore in Q4 FY15 compared with R23,000 crore in 9M FY15.

The Reserve Bank of India, in response to bankers’ queries, clarified that cases referred for CDR, irrespective of whether they are admitted or approved would be classified under the forbearance window and, hence, will attract only 5% provisioning, subject to the timeline mandated for different types of restructuring allowed by the regulator. These types consist of bank, joint lenders’ forum and CDR level of restructuring.

From April 1, banks have to classify restructured loans as non-performing assets, which implies recording 15% provision in their books.

Banks are convening JLFs for stressed accounts classified as SMA-2 or companies that have failed to pay interest for 90 days, and instituting corrective action plan, which consists of either rectification or refinance or recovery depending on the strength of the assets. Bankers are also advising companies to sell non-core assets to reduce financial burden.

The total value of cases approved or admitted in FY15 fell nearly 67% in FY15 compared with the previous fiscal. The cell received R44,000 crore in references in FY15 compared with R1.32 lakh crore in FY14. Approvals for the financial year stood at R39,200 crore compared with R99,500 crore in in FY14.

In Q4 FY15, eight cases were referred against nine cases in Q3.

Analysts have pointed out that of the total assets restructured that are yet to exit CDR, nearly 60% by value occurred in last two fiscals. With an average moratorium of two years, FY16 and FY17 may see significant slippages in terms of value. Slippages in terms of number and value have increased over the last six sequential quarters, not including Q4 FY15.

Of the large cases referred in the fourth quarter of fiscal 2015, some were Pipavav Defence and Offshore Engineering’s R12,000-crore debt, Kolkata-based Concast Group’s loans worth R7,500 crore and Adhunik Metaliks’ R3,500 crore.